The Top 5 Ways to Invest in the Florida Marijuana Market

Bottom Line: The Florida marijuana market is 2/3rds the size of Canada’s, growing at ~300% and offers investors huge upside — if you just know where to look. We went digging into state-level data to help you understand the demand trends in the Florida market and identify who the best-positioned companies are.

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Drake Loses, Canopy Wins in New Cannabis Partnership

Bottom Line: Drake is taking a risk partnering with the one large LP without a track record of growing high-quality cannabis. He chose money and scale over quality, the question is if this will end up hurting his brand or if Canopy can up its growing game. Canopy wins by signing one of the biggest celebrities in the world to endorse its products.


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Bruce Linton Chooses MSO Vireo Health for Next Act

Bottom Line: Linton will work with Vireo’s current Chief Executive Officer Kyle Kingsley to oversee the company’s M&A, capital raising, and overall strategic direction. 

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How Will the Cannabis Drinks Market Evolve?

Bottom Line: This article explores one company’s strategy to grow sales of cannabis-infused beer. Will small batch cannabis breweries own the market or will consumers gravitate to low-cost mass market options. The outcome will be a fascinating case study for business school.

Heineken Cannabis Infused Beer

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Some Good Data on the State of the Rec Market in Uruguay

Bottom Line: This article reveals that in Uruguay each producer is capped at 2,000 kg of sales a year and also has their selling price capped at only C$1.22. Not quite the attractive market investors were likely sold by Aurora and others.

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What Cannabis Can Learn from Beer and Ice Cream

Bottom Line: A well-researched article on how the cannabis industry can cut costs and improve efficiency. The article also explores the importance of being first and understanding who your customers are and what they want to buy. Read more»

Will Portugal Become the Low-Cost Producer to Europe?

Bottom Line: Portugal has much lower growing costs than Canada and enjoys less red tape to export to the rest of Europe seeing as it is already part of the trade bloc. In our opinion, investors should be prepared for Canadian imports to be replaced by domestic European supply within the next five years.

Source: Wikipedia

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Mexico Delays Legalization Vote Until April 2020

Bottom Line: The probability legalization passes doesn’t look like it has gone down, this is simply a delay. Marijuana - Mexico

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Weekly Marijuana Stock Performance

The cannabis sector had a rare green week rising by 1.3%. The U.S. MSOs underperformed Canadian names for the first time in multiple weeks, falling 0.3% compared to the LPs up 1.5%.

We’ve been watching the performance of the U.S. and Canadian stocks closely and U.S. stocks are definitely beginning to outperform their Canadian peers. Since the end of September, U.S. stocks are down 6.1% while the Canadian LPs are down 16%. Investors should begin building a long-term position in a basket of the top five U.S. operators, but save some extra cash to buy on any weakness in 2020.

An upcoming catalyst to watch is a UN meeting in March 2020 to potentially deschedule cannabis as a schedule 1 drug. If this goes through with America’s blessing it could set the wheels in motion for federal legalization sooner than later. The recent vaping crisis will also turn out to be positive for the legal industry as it will scare consumers away from black market vaping products.

The overall marijuana index outperformed the S&P by 0.5% but underperformed the TSX by 0.4% this week and has underperformed by 48.5% and 43.4% YTD.

Source: New Cannabis Ventures

Market Outlook

There are now question marks whether increased sales from cannabis 2.0 products will lift the stocks. Capital markets are largely shut to cannabis companies right now, which is a problem when the business models are built on rapid expansion and big deficits.

Price compression has arrived and will drive cannabis stocks lower over the next 6-12 months in our view without a new regulatory catalyst. Canada cannabis investors should not be putting more money into the sector until retail prices find a bottom.

U.S. stocks will continue to outperform Canadian LPs from here in our view with more catalysts potentially on the horizon. At the first whiff of nationwide U.S. legalization, investors should pile into the largest MSOs and hold for the long term.

Canadian LPs are still stuck in a legal market growing slower than investors expected, making it hard to show the revenue growth embedded in their trading multiples. LPs are showing slow growth in 2019 and even with the 2020 rollout of edibles, vapes, and topicals growth is unlikely to exceed 150% in 2020. U.S. operators in comparison are growing revenue 150%-300% in 2019 and at similar rates or better in 2020. With analyst consensus wildly too high for Canada LP’s in 2020, there may still be downside in the sector

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